Sweaty Palms?

Posts Tagged: Future Directions

Hearing the words “high dive” evokes strong memories and great stories from many adults. It was almost a right-of-passage at the local pool. Unfortunately, there are not many 3-meter diving boards left in North America, and today’s kids will not have that terrorizing, yet exhilarating experience of their first jump from ten feet. The removal of diving boards is indicative of a spreading and disturbing phenomenon in risk management, the unsubstantiated elimination of programs and activities resulting from kneejerk reactions and poor analysis.

To be an effective risk manager, it is necessary to have an appropriate working definition of risk. The problem is that there is no agreed upon definition of risk, in fact, a quick internet search produced at least 25 different definitions. While realizing that risk does indeed have different meanings in different applications and industries, a good general definition for use in recreational risk management is the probability of a hazard to lead to a loss. It is critical to understand that “risk” is the probability, which can be measured and quantified.

In addition to understanding the definition of risk, a thorough understanding of the difference between risk and uncertainty is important to a risk manager’s success. Uncertainty is not the same as risk, it is inherently immeasurable. With risk, the odds are known, or at the least, there is information and data that can be used to quantify it. This is the case with the lottery, although someone who buys a Mega Millions ticket may not know the odds of winning, it can be calculated using available information. With uncertainty though, the odds, by definition, cannot be known. Differentiating between risk and uncertainty underscores the many challenging decisions a risk manager must make.